Revisiting the National Mortgage Settlement at the State Level

It’s been 10 years since the housing crisis hit this country and the world’s economy. National Public Radio is currently taking a look back at different aspects of the financial melt-down on its MarketWatch program, including the National Mortgage Settlement, the largest consumer financial protection settlement in United States history.

As part of these mortgage settlement funds, each state received a large monetary award. However, each state was allowed to determine how to spend their money. Many states used the funds to plug holes in their general budget and for other non-housing related expenses. Fortunately, a number of other states did dedicate these funds to address the housing crisis. We want to highlight a positive outcome from the use of the mortgage settlement funds – that of the Illinois homeowner and neighborhood stabilization program developed by Illinois Attorney General Lisa Madigan.

The Attorney General’s first act was to ensure this funding remained dedicated to addressing the crisis and wasn’t lumped into the general revenue funds. Next, she formed a Blue Ribbon Advisory Council of housing and community development experts from the non-profit, government and private sectors to create a program to distribute the funding for both homeowner counseling and housing rehabilitation efforts throughout the state. Finally, an RFP was jointly developed by the council and a consulting group, BRick Partners, LLC. While this process took significant time and effort, it produced a program that took creative and novel approaches to addressing the housing crisis’ effects.

In the end, Illinois’ effort resulted in more than $70 million being awarded to 53 different organizations or partnerships, including: 29 housing development teams, 11 homeowner counseling agencies, and 13 technical assistance providers. Two of the innovative outcomes from this program include:

Development of a multi-community partnership in Chicago’s suburban communities to get an accurate picture of the foreclosure problem, and then the creation of a cross-border redevelopment approach. This example of inter-town cooperation will serve as a model for future work.

Creation of a lending product for acquisition and rehabilitation of 1-to-4 unit properties offered by the Community Investment Corporation. Settlement funds were used to create a loan loss reserve which made the offering of this new product feasible.

While the program will not wrap up until 2019, NCST commends the commitment of Illinois’ Attorney General in creating this forward-thinking program to use the mortgage settlement funds in directly addressing the state’s neighborhood stabilization and affordable housing needs.